All Forum Posts by: David Krulac

I've used "Signature Loans" from Credit Unions which are essentially lines of credit with no collateral.  Your Signature is your collateral.

@Radovan Matusovich Very familiar with Westwood, I can remember when the big red brick factory opened as a Sealtest Ice Cream producer. I've owned property close by in Pittsburgh and there are good areas where you can rent out property profitably. For me starting out I would finance property, save cash and increase your yield as well as allow for more purchases.  But that's me.

@Brian Larson Very familiar with your area as well as I taught at Trafford High School, before consolidated with Penn.

When I was starting out I had little to no cash, and college debt, albeit not medical. The first 11 properties that I bought were all financed 100% in one way or another.  I can say for anybody else but for me, if I wasn't able to finance properties, I would not have been able to grow the portfolio.  I told myself to borrow as much as I can for as long as I can.  The first property was 9% interest; the second property was 9.5% interest and the third property was 15% fixed to 30 years. I owned the first property for 24 years, the second for 37 years and the third property for 23 years.  Although I did refinance #1 and #3 three times each to cash out and lower the interest rate.  I can't tell anybody what they should do, I can only say what I actually did. 

We have a separate ESCROW type bank account where each tenant has a separate sub account tied to THEIR SSN. 

We ask, "If we rent to you how long do you plan to stay?" We sometimes offer 2 or 3 year leases, but not usually as the first lease. We look at how long the tenant has stayed at their last 2 leases. And we ask "Why are you moving?" One tenant had stayed at their current leased apartment for 16 years. They wanted a a single family detached home, which I provided and thought they might stay a long time. They only ended up staying 2 years and bought a bigger house on the next street over from my rental. So the technique is not 100% fool proof. Another current tenant said, the LL is selling our current house. I check to see that was correct and their current property was being list in MLS and was being sold. They had lived there 10 years. They currently have lived at my property 11 years now. Another tenant prospect told me that they wanted moving to move to my house for the acclaimed public school system. They stayed for 13 years until their youngest child graduated high school, before moving. (Even though the father traveled 75 miles to work for those 13 years.) I have another tenant, who had specific wishes/needs for their rental property. I did not have anything that fit their criteria, so I showed them properties listed for sale, which I would buy and rent to them. We found a desirable property for sale and I reached an agreement that I would buy and they would rent on a 3 year lease. They stayed 25 years. Why would they move this was their dream house! Once that worked I first time I rinsed and repeated for another tenant who had specific wants. First step, do I have anything that fit their needs? Secondly is there a listed for sale property that fits their needs in the MLS? If not, I went into phase 3 and decided to build them a very specific house that fit their needs. I gave them some limited control of the design of the house to be built to satisfy their requirements, but also make sure I wasn't creating a white elephant that would be difficult to sell or re-rent. Same 3 year lease requirement, and happily they are working on a lease until the 27th year of their tenancy. But they're NOT my longest tenants; I've had several tenants that have stayed more than 30 years. One of which started on a 1 year lease and another started on a month to month lease. I'm not opposed to making accommodations to satisfy a tenants needs and wants. I've been renting a long time and have tenants stay an average of 12.5 years.

we had a telephone on the corner of our property that kept sinking further in the ground such that the electric wires were about 4 feet from touching the ground.  To remediate they excavated and dumped 5 cement truck loads of concrete into the hole.  After the concrete cured/hardened there were no further problems, but the cost was not cheap and the results are not warranted.

The Social Security Administration has an actuarial table on their website.  It is  unisex and there is figures that apply to both male and female.  It the seller is 70 years old, for example, then the table says that the tenant's "Life Estate" interest is worth .60522, while the "Remainder" interest is worth .39478  Therefore is you are buying a property and there is a Life Estate for a person aged 70, that you should be buying the property for 39.478% of its current value to compensate for the Life Estate living there for the remainder of their life for FREE.  If the Life Estate person is aged 98 years the Remainder interest is worth 79.00%.  In essence the younger the age of the Life Estate, the larger the discount to current value. This can be a technique to acquire property at a discount, if you are willing to wait for the Life Estate to conclude.  But never pay current value if the property is encumbered by a Life Estate.  And you can show the Seller, the Social Security Administration unbiased values.

We have had several tenants stay over 30 years, and average 12.5 years of tenancy. WE ask on our application How long have you stayed at your current residence?  We also ask in the interview, "If we rent to you, how long would you plan to stay?" We look for tenants who have stayed a long time and obviously don't like to move. We look for families who have kids in the school and are looking to keep their kids, or start their kids in the local schools.  We had a tenant who worked in Washington DC and another who worked in Baltimore, Md, who lived in our Pennsylvania rentals, just so their kids could go to the local schools, which are highly rated. We primarily rent single family detached houses in neighborhoods with good schools, low crime and mostly owner occupied neighborhoods.  In some cases, we have the only rentals on the street, and the tenants stay so long the neighbors think they own the place.  

We bought a property that had a "Life Estate" tenant, who was legally allowed to live their as long as they wanted or until they passed away.  There are actuary tables used to determine the value of a property encumbered with a "Life Estate" based on the tenants current age and gender.  Statistically women live longer than men and younger people will live longer.  So in your case a male of a certain age in their 70s is expected to live x more years.  Using this formula which is common practice, the sales price is reduced by the "value" of the "Life Estate".  In the property we bought, the fact of the "Life Estate" scared off potential buyer s and reduced the not only the pool of buyers but also the purchase price. The property that we bought was a 50 acre farm with a farm house, which we planned to subdivide into a residential development.  Having the tenant stay in the house was not any burden to us as as we proceeded with the subdivision plan, which we allotted a year to get all approvals.  Therefore the house was occupied, rather than vacant during that process.  It ended up that the tenant lived there for 2 years, then needed to go to a nursing home.  That decision was totally the tenant's timing and choice.  I would recommend that you get an attorney involved and negotiate a price based on what essentially is a "Life Estate."  Or I might also negotiate a departure date with the tenant with a cash incentive. The seller probably don't realize that the arrangement they suggest will cost them money, possibly a lot of money.

I'm always a buyer, recession, good times, bad times or in between. Right now sales are down, I'm still a buyer. There is less competition and the deals are sweeter. So far this year, I bought 2 places with 3.25% fixed interest and one with 3.75% fixed interest for 30 years. I bought a place $70,000 below appraisal and another one $120,000 below appraisal. And I bought another place that needs $25,000 of work for $86,000 below ARV.

In good times with multiple offers and people bidding $100,000 over asking, I would not be getting all these deals.